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What is a Company Voluntary Arrangement?
In this article, we will discuss the CVA process, including how it works and what it entails. A Company Voluntary Arrangement (CVA) is a legal agreement between a company and its creditors to repay some or all of its debts over a set period of time. A Company Voluntary Arrangement can be a useful tool for companies struggling with financial difficulties, as it allows them to continue trading while also addressing their debt issues.
Table of Contents
What is the Company Voluntary Arrangement Process?
1. Consultation with Insolvency Practitioner
The first step in the CVA process is for the company to consult with an insolvency practitioner (IP). The IP will assess the company’s financial situation and advise on whether a Company Voluntary Arrangement is the best option. The IP will also work with the company to prepare a proposal for the CVA, which will outline the repayment plan for creditors.
2. Proposal Preparation
The next step in the CVA process is the proposal. The CVA proposal is a document that outlines the terms of the arrangement, including the proposed repayment schedule and the duration of the CVA. The proposal must be approved by the company’s creditors, and the IP will work with the company to ensure that it is fair and realistic.
3. Creditors Meeting
Once the proposal has been prepared, the company will hold a meeting with its creditors to present the CVA proposal. Creditors will then have the opportunity to vote on whether to accept the proposal. If a majority of creditors vote in favour of the proposal, the CVA will be approved.
4. Implementation of CVA
Once the proposal has been prepared, the company will hold a meeting with its creditors to present the CVA proposal. Creditors will then have the opportunity to vote on whether to accept the proposal. If a majority of creditors vote in favour of the proposal, the CVA will be approved.
5. Completion of CVA
Once all payments have been made and the CVA has been completed, the company’s debts will be considered fully settled. The company will then be able to continue trading without the burden of its previous debt issues and the CVA process ends.
When does a business need a CVA?
Here are some situations where a business may need a CVA:
-The business is struggling to pay its debts and is at risk of insolvency.
-The business has been served with a winding-up petition or a statutory demand.
-The business is experiencing financial difficulties due to external factors such as changes in market conditions, economic downturns, or loss of a major customer.
-The business has a viable future but needs some breathing space to restructure and repay debts.
It is important to note that a CVA is not suitable for all businesses and should only be considered after seeking professional advice from a licensed insolvency practitioner.
CVA process Conclusion
A Company Voluntary Arrangement can be an effective way for companies to address their financial difficulties and continue trading. By following this CVA process, companies can work with their creditors to come up with a fair and realistic repayment plan, ultimately allowing them to move forward and focus on their future success.
If your business is facing troubled times and feel a CVA may be the right solution for your business then contact us for confidential help and advice.
Call our expert team on 0800 088 2142 or fill in the form below to book an appointment.
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